Reverse Mortgage to Purchase a Home
A home owner wishing to downsize can use a Reverse Mortgage to purchase their retirement home and live comfortably with no mortgage payments.
Our 65 year old client owned a 2,539 sq. ft. home. She lived alone and the house and yard were too much to take care of. She wanted to move into a smaller place with no yard to maintain.
She also wanted to have no mortgage payments. Her natural thought was to purchase a smaller property paying all cash using the proceeds from the sale of her current home.
Consulting a Realtor we know she found that she would have about $250,000 in cash left after she sold her home.
Looking for a condo or PUD in her desired area in the $250,000 price range was discouraging. In fact it wasn't possible to find anything, Her Realtor advised her to talk to us about her options.
We explained that she could use her money to make a down payment on a higher purchase price and take out a reverse mortgage instead of a traditional mortgage. This would accomplish both goals of getting a suitable property and have no monthly payment other than property tax and HOA dues.
She was able to greatly increase her price range and settled on a PUD priced at $460,000.
After putting $250,000 down she obtained a reverse mortgage with no monthly payments. Her monthly expense was HOA dues of $350 and property tax of $470. A total monthly expense of $826 that comfortably fit with her retirement income. Her new home is a 20 year old 1,464 sq. ft. home in a much better area than she thought possible. She was able to greatly enhance her retirement by using a reverse mortgage to purchase a much newer and better home than an all cash purchase would allow.